Your money should work for you. The concept behind passive income is just that. There are many methods to invest your money, but some provide higher returns than others.
Closed-end funds have stood out as a fantastic choice for investors. They are mutual funds that resemble exchange-traded funds in that they may be exchanged on a stock exchange. Additionally, CEFs sometimes provide very alluring returns. Here are a few high-yield ETFs that are reliable sources of passive income.
1. Aberdeen Global Dynamic Dividend Fund
The primary goal of Aberdeen Global Dynamic Dividend Fund (AGD -3.15%) is to provide substantial dividend income. The future capital growth of the fund is its secondary investing goal. As of July 31, 2022, the CEF’s net assets were at $139.7 million.
The top holdings of the fund make a lot of sense in light of these two objectives. The greatest investments are made up of dividend-paying equities with promising growth potential, such as Apple, Microsoft, and AbbVie.
Currently, the CEF provides a very high dividend yield of around 7.8%. It has a net expense ratio of 1.18%. The price of the Aberdeen Global Dynamic Dividend Fund is 10.1% below its net asset value (NAV).
2. The Alliance of the AllianceBernstein Global High Income Fund
Another CEF that aims to deliver high levels of income with an additional goal of capital appreciation is Bernstein Global High Income Fund (AWF -1.53%). Based on the performance of the markets, this fund modifies the degree of risk in its portfolio, lowering risk during turbulent markets and increasing risk during favorable markets.
The CEF primarily invests in government bonds and corporate debt assets. Fund managers at AllianceBernstein favor a global, multisector strategy that offers a compelling risk-return scenario. Currently, American assets make up more than 72% of the portfolio of the fund.
The distribution yield for AllianceBernstein Global High Income is around 7.6%. The fund has a 1% net expense ratio. The market price is 5.3% below the NAV.
3. BlackRock Global Dividend Trust Enhanced
Similar to the first two CEFs discussed, BlackRock Enhanced Global Dividend Trust’s (BOE -2.27%) main investing goal is to provide income, along with long-term capital growth as a secondary goal. As of August 22, 2022, its net assets were above $721 million.
At least 80% of the fund’s net assets are typically allocated to dividend-paying equities. And generally at minimum 40% of its assets is held outside of the United States. Microsoft, Novo Nordisk, Sanofi, and Reckitt Benckiser Group are some of the largest holdings.
The dividend yield for BlackRock Enhanced Global Dividend Trust is now above 7.4%. By writing covered options, typically between 30% to 45% of its total assets, the fund increases its revenue. It has a 0.90% net expense ratio. Additionally, the CEF is accessible for 10.5% less than its NAV.
Several things to consider
These three closed-end funds are all genuine generators of passive income. Investors need be aware of a few crucial details about the funds, however.
First, none of these three CEFs could be expected to have considerable capital growth. Yes, they all have capital growth listed as one of their secondary investing goals. However, distributions will account for the majority, if not the whole, of their overall returns.
Second, the share prices of these funds might fluctuate greatly. All three have decreased more so far this year than the S&P 500.
Leverage might cause certain CEFs’ volatility to increase (borrowing). The good news is that none of these funds heavily rely on debt. Leverage is not used by BlackRock Enhanced Global Dividend Trust at all. Only 4.84% and 0.11%, respectively, are the effective leverage rates for the AllianceBernstein Global High Income Fund and Aberdeen Global Dynamic Dividend Fund.
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